Stock Market Soars As US Fed Opts For Status Quo, Industry Lauds Decision

The US economy is witnessing rapid expansion of economic activity, with stabilised unemployment rate at low levels, boosted by solid labour market conditions

Stocks, including domestic equities, have rallied largely, as slow growth would mean more rate cuts

Source : PTI

The US Federal Open Market Committee's (FOMC) decision to maintain the federal funds rate at 4.25 per cent-4.5 per cent is a commendable move, given the persisting geopolitical volatilities, industry experts here said on Thursday. The US economy is witnessing rapid expansion of economic activity, with stabilised unemployment rate at low levels, boosted by solid labour market conditions.

"The status quo stance of the Fed rates is appreciable amid increased uncertainty around the economic outlook, strongly supporting maximum employment and returning inflation to its 2 per cent objective," PHDCCI President Hemant Jain said.

Going ahead, the industry chamber expects the US Fed to continue to monitor the implications of incoming information for the economic outlook and be prepared to adjust the stance of monetary policy as appropriate if risks emerge.

According to Infomerics Valuations and Ratings Ltd's Chief Economist Dr Manoranjan Sharma, while the Fed has multiple things to consider in its risk matrix, it is charged with the twin goals of maintaining full employment and low prices.

"In the wake of heightened global uncertainty and increased business complexities stemming from President Donald Trump’s significant policy changes, the Fed held the rates steady," said Sharma.

This was fully anticipated because “uncertainty around the economic outlook has increased". "But the Committee is attentive to the risks to both sides of its dual mandate.”

The Fed forecast two rate cuts for this year and expected the core personal consumption expenditures price index, the Fed’s preferred inflation forecast, to rise to 2.8 per cent in 2025, up from a prior forecast of 2.5 per cent. It also expected GDP at 1.7 per cent this year, down from the earlier forecast of 2.1 per cent, Sharma emphasised.

Stocks, including domestic equities, have rallied largely, as slow growth would mean more rate cuts, but the expectation is not on solid footing because of the tariff-related uncertainty, which US Fed Chair Jerome Powell also flagged clearly.

"That said, the broader benchmarks - NSE 500, small-caps, and mid-caps have broken above their respective falling channels and have generated bullish reversal patterns in what has historically been a bullish period, seasonally speaking," Axis Securities' Head of Research, Akshay Chinchalkar, said.

(This report has been published as part of the auto-generated syndicate wire feed. Apart from the headline, no editing has been done in the copy by ABP Live.)